Train yourself to be financially responsible and live within your means now and it will serve you well when you are retired and living on a fixed income for life. Most people find that big expenses such as mortgage, rent, auto payments, taxes and insurance are usually easier to budget for and manage. There are many things to save for: an emergency fund, a down payment for a home or an automobile. But the biggest savings need is for your retirement. Retirement is a time when you may be living for 10 to 40 years without earned income. The key is to live well below your means so you can save for your future consumption. Here are a few suggestions to get you started: • This first one is my favorite, and once mastered, will take you to the land of personal financial independence: a two income household devises a plan to live from one income and save the second. Often I hear an expression of annoyance or dissatisfaction at the suggestion of making a home purchase that is affordable in price — living within but preferably below your means — and is in an affordable area versus making a purchase that is in keeping with your dream home which is almost always a financial stretch and usually requires using both incomes. A solid financial plan will help you avoid this potentially lethal pitfall. Make the big purchases by spending less than you can actually afford.
In this segment from Motley Fool Answers, Alison Southwick and Robert Brokamp break down a proper investing and retirement strategy by decade. First, the duo talks about people in their 20s. Early adulthood is often challenging on the financial front, which is why many young people get stuck focusing on short-term issues . . . like this month’s bills. But Bro says you should actually be focused on three things: long-term investing for your retirement, paying down debt, and getting your credit score buffed up. He also warns us about the biggest financial mistake people make at this age.
A full transcript follows the video.
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This podcast was recorded on April 18, 2017.
Alison Southwick: So let’s start with our listeners in their 20s. Your 20s are an exciting time. You’re starting to adult, you’re shopping at IKEA, and you’re thinking maybe you should maybe, at some point maybe kind of a little bit, start thinking about your finances some more.
Robert Brokamp: Maybe a little bit. The very first thing you should think about, because I’m the retirement guy at the Fool, is saving for your retirement, and if you start in your 20s you should be shooting for maybe 10% if not 15% of your income. That is how…